The Back Alley Archives

Remember Bernanke saying nobody saw this coming? Remember him feigning ignorance? He lied to us all. Did he even lie under oath while testifying before Congress? I can't say for sure; I'd have to go back and read all the transcripts. But of this I am certain: we must abolish the Federal Reserve. And all other central banks, for that matter.

Spiegel has a great article discussing the warnings of William White, former Chief Economist of the Bank of International Settlements (sort of the central bank of central banks), who repeatedly explained to the world's central bankers that they were playing with fire and risked screwing up the entire world. Of course, Greenspan was continuously exalted and they decided to take the path of least resistance, wrecking all our lives unnecessarily. The entire article is worth the read but here's a snip:

White recognized the brewing disaster. The analysis department at the BIS has a collection of data from every bank around the globe, considered the most impressive in the world. It enabled the economists working in this nerve center of high finance to look on, practically in real time, as a poisonous concoction began to brew in the international financial system.

White and his team of experts observed the real estate bubble developing in the United States. They criticized the increasingly impenetrable securitization business, vehemently pointed out the perils of risky loans and provided evidence of the lack of credibility of the rating agencies. In their view, the reason for the lack of restraint in the financial markets was that there was simply too much cheap money available on the market. To give all this money somewhere to go, investment bankers invented new financial products that were increasingly sophisticated, imaginative -- and hazardous.

As far back as 2003, White implored central bankers to rethink their strategies, noting that instability in the financial markets had triggered inflation, the "villain" in the global economy. "One hopes that it will not require a disorderly unwinding of current excesses to prove convincingly that we have indeed been on a dangerous path," White wrote in 2006.

In the restrained world of central bankers, it would have been difficult for White to express himself more clearly.

http://www.spiegel.de/international/business/0,1518,635051,00.html

Nice eye candy from the article:

Everyones a monday morning quarterback

They all wanna either say they knew or they wanna report that someone knew

In the end, no one listened and no one cared. Maybe next time, sell call options, short bank stocks and buy treasuries if you're so badass and right.

All these people who have said they saw it coming took big losses in their portfolios. Now THAT'S stoopid

What a shocker...rad's defending the status quo.

In all seriousness, how is 2003 "monday morning quarterbacking"? Wasn't that 4 full years before subprime blew up and SHTF?

Seems to me like he tried to tell the coach at halftime that his scheme was going to lose the game and the coach told him to shut the fuck up and sit down. The gods had plenty of time to save us if they gave a fuck. The problem is they don't care one way or another so long as they maintain power and control over us minions.

YES!!!!

Now I'm confused.

yes meaning...you're right...YES!

look - in your example, if cade holliday told Coach meyer that if he didn't stop throwing the bubble screen that we'd all lose the game, meyer would tell holliday to STFU!

totally agree with you.

first off...the BIS is not a powerful, end all entity...to my knowledge, they're made up of central bankers and their suggestion of policy and/or mandates are just that...suggestions.

secondly...we all know that this recession is something that occured and that was in the making for several years...some'll argue it started post 9/11 as a by-product of national initiatives to encourage spending...some'll argue it started way before that in the clinton administration with the gov't backed housing agencies and their directive to make housing for homebuyers made easier....we all were talking about housing bubble in the early to mid 90s...we all were talking about leverage constraint...we all were talking about the lack of risk aversion....the events that did occur in the last several years are all a direct result of the ideas and concerns everyone did have but imho, were never predicted to this massive extent....the trickle down aspect of how these things happen and at great magnitude to my knowledge was never even thought of.

so when this guy white says he saw it coming, who fucking cares...everyone heard or read about bubbles and the possibilty of a housing market collapse...white wasn't the only one talking about it....still - and this is the basic fundamental of capitalism - still, there'll always be differing of opinions....on a rate of 1-100, one manager might care at a 60% level, another at a 10% level...the differences between these managers is directly related to the percentage of gain and loss in their portfolios relative to principal....THAT'S IT...very, very simple....the competition to be better than the DJIA, the competition to be better than the investmant grade bond index, the competiton to be better than PIMCO, has created a situation where people will have varying views on the data we receive...and this is what separates one from the other...and this is what makes one 'better' than the other...the interpretation of data or occurrences that are received either public or non-public.

so when i ask about white's portfolio, i wanna know...did he capitalize on all the valuable insight he provided or did he lose his money like everyone else? if he shorted stocks and bought puts, he did well...trust me...if he didn't, he's a stupid ass who likes to talk shit....THAT'S ALL REALLY.

so was bernanke feigning ignorance?

first off - there are conversations and ideas being batted around that occur at the fed or at the BIS or at the central bank conferences or at the G8 meetings that are not meant for the public to hear...a leak of a chat between two people gets released and it sends markets in a tizzy...i blame the internet for this and it has been, not only a way to get information faster which is a good thing, but it also gets misinformation out faster which is a bad thing...just this week, at the G8 meetings in italy, one canadian politician who heads the opposition party was quoted out of context, his quote was released to the media, his quote was negative to the markets, a few money managers (remember, there's competition to be the first and the best) acted upon this information and sold canadas, in turn, others who took a differing view bought canadas, some who were late to the party hedged themselves accordingly and were frustrated that they were not kept in the loop, global managers saw a spike in activity and redirected their focus on whatever it is they were focusing on....the prime minister gets wind of it and publicly blasts his opposition leader for his actions only to find out that he was taken out of context....an apology was issued and the markets traded up as a result of the goof...the ones who were late to the party benefitted from being lax or being last and ironically, made money....this is the type of stuff that greenspan was really good about containing...his cryptic speeches and double talk always gave the markets a fair opportunity to take a view one side or the other....leaking a conversation about replacing the USD as the global currency would be irresponsible because it'll no doubt affect the market....as to greenspan and/or bernanke knowing of the possibilities, i'd say yes for sure...obviously yes and absolutely they should have known...for sure...as to knowing to what extent the markets/economy would be effected, no one would know until it happened i guess is what i'm saying...to say that he knew what was going to happen 3-5 years later would seem to me to be accusing him of being a time traveler of some sort.

so if meyer had listened to holliday and stop throwing bubble screens, two things would have occurred as a result...we win, or we lose...if we win, meyer takes the credit...if we lose, meyer takes the fall...holliday doesn't go out and say it was his idea and therefore, he should get the accolade...conversely, he doesn't go out and say he fucked it up for his team because he convinced meyer to stop throwing the screen...lastly - how highly do you think of meyer knowing now that he takes advice from his players during the heat of the battle? how highly do you regard meyer now knowing that he is unsure and incapable of making his own decisions regarding direction of his team...white is no addazio or strong...heck - white's no tebow or spikes...white is actually markus manson telling the media that he should've been utilized more

ok I gotcha now. And I do realize that the BIS is pretty much just a place for the central bankers to get together and act like 60 year old frat boys from some uptight university...they're toothless as an entity...

I'm just sayin' that Bernanke's a fucking liar when he said 'nobody saw this coming...nobody could have seen this coming'....what sucks is he's a politician despite the supposed independence of the central bank...he's worried about protecting turf, not doing the right thing. Maybe he thinks protecting his turf is the only way to protect the economy...if he thinks that then he's simply delusional.

The point is that there were plenty of people telling Greenspan he was wrong and he didn't give a fuck....he thought he was right so fuck'em, which is his prerogative, but that means it's on him since he made the choice...Bernanke shares just as much blame....he was right there with him....in the football example, when a coach fucks up this badly you replace his ass....of course, I'm worried about replacing Bernanke at this point because I'm really really worried Obama's going to give the post to Summers...god help us all if he does....

More an indictment of Greenspan than Bernanke, IMO. Not that I'm defending Bernanke, but Greenspan was the one with the bubblicious money policies.

Werd.